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STORY HIGHLIGHTS

Political capital, manpower and financial resources form the foundation of the piracy business

Ending piracy requires focus to shift away from perpetrators and toward the enablers

MOGADISHU, April 11, 2013– The global fight against piracy in Somalia has centered on prosecuting pirates and mobilizing naval forces. But to get to the root cause of the problem, the international community must focus on helping the nation build a functional political system, according to a new World Bank study.

Three elements – political capital, manpower and financial resources – form the foundation of the hijack-for-ransom phenomenon in Somalia, where a history of inter- and intra-clan competition and European colonization has left many areas without functioning institutions, according to the study. That has allowed pirates to recruit local youth, buy guns and speedboats, and most importantly, secure coastal areas where they can anchor hijacked vessels for months or years.

Pirates in the East African nation favor places such as Puntland and Central Somalia, which provide enough political stability to do business in, but not enough state control to challenge piracy operations. They then use bribes and physical threats to tilt the balance of power between politicians and gain long-term access to the coasts.

The cost of that political operation takes up as much as 86% of the piracy proceeds, according to the study. A large sum – sometimes $300,000 per vessel – goes to government officials, businessmen, clans, militia and religious leaders as bribes and “development fees” to make sure the politicians won’t interfere in the piracy business. Crewmembers, often hired from a particular clan or location, command significantly higher salaries than local wages. Pirates also pay more than locals do for meal services, energy, and water. Given the local custom of resource sharing, piracy proceeds trickle down to local residents and other stakeholders, creating a favorable political environment in which the pirates can operate.

Their success has global consequences. Between 2005 and 2012, more than 3,740 crewmembers from 125 countries fell prey to Somali pirates, and as many as 97 died. On the Somali side, the number of pirates lost at sea is believed to be in the hundreds. The ransom extracted during that period rose to as much as $385 million. Piracy also hurts trade, as shippers are forced to alter trading routes and pay more for fuel and insurance premiums, costing the world economy $18 billion a year, the study estimates. Since 2006, tourism and fish catches, as well as other outputs from coastal commerce, have declined in neighboring countries in East Africa.

Somalia’s economy is not spared either: piracy-related trade costs are at $6 million a year, without taking into account the fact that potential sea-based economic activities are constrained by piracy. The collaboration between pirates and Islamist insurgent groups also has raised concerns about Somalia’s political stability.

The international community has mostly focused on offshore measures to fight piracy, such as increasing naval pressure and onboard security, which have helped reduce the number of hijacks. But ending piracy would call for those costly measures to be expanded and made permanent, which wouldn’t be sustainable in the long run. Efforts that target onshore prevention, such as paying youth more to discourage them from joining the pirates, would only prompt owners to pay crew members more. Given the poverty rates among the population from which the pirates are typically recruited, owners can afford to pay pirates more without significantly hurting profit.

To end piracy off the Horn of Africa, the study urges a paradigm shift away from perpetrators and toward the enablers of piracy. With a limited number of suitable coastal areas available to anchor hijacked ships, piracy would be less profitable if Somalia removes access to safe anchorage points or significantly raises the price for coastal access. In addition, the central government can offer incentives – along with built-in monitoring mechanisms – to encourage local stakeholders to stop pirate activity and learn from the success and failure of Afghanistan’s policies targeting opium poppy production and Colombia’s against coca production.

At the heart of this policy agenda lies the need to better understand the political economy of resource sharing, so that winners and losers are properly identified and compensated. The lessons from the study go beyond piracy eradication and speak to the fundamental issue of state building in Somalia.

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